By Anil Bhoyrul
Those who flipped properties in the UAE are as guilty as developers for the state of the market
Everyone likes to put the boot into people we don’t know. On this website, there is no shortage of self-styled experts passing commentary on a host of subjects, usually by giving false email addresses. The first whiff of a scandal, and I can predict with 100% accuracy the first 50 readers who will comment on it — what really happened, who is really guilty, and why they deserve to spend the rest of their lives behind bars (at the very least).
And so to Kabir Mulchandani, the former boss of Dynasty Zarooni. He knows this better than most, having spent 140 days in a Dubai cell accused of multiple fraud. His fall from grace made headlines around the world — some in the media described him as the “Madoff of the Middle East”, while thousands more decided to blog on various websites to explain “how he did it.”
The thing about Mulchandani — and it is something that has received remarkably little media attention — is that earlier this year he was cleared of every single charge brought against him, by three separate courts in Dubai.
Boring as this may sound, he didn’t do it. In a frank interview in this week’s issue, he goes into the details of the cases against him, and the lengthy battle to clear his name.
Two things about his case really stand out. Firstly, that despite the recent wave of negative publicity, the Dubai legal system works. Mulchandani was quizzed for eight hours a day for 40 days running while in custody – a total of 320 hours. Prosecutors did not assume he was guilty. They looked into every allegation, every detail and every piece of evidence, all of which was presented to the courts which unanimously cleared him. Justice was ultimately done.
It is reassuring to see that, against a backdrop of high profile cases and a public desire to see corruption rooted out, those who are innocently caught in the storm are treated fairly, and if not guilty, released.
Secondly, the case against Mulchandani was brought by a handful of his former customers — property speculators who owed him huge sums of money and had their post-dated cheques bounce (as a result of the financial crisis). Rather than face the music, they went after Mulchandani, collectively claiming they didn’t actually owe him the cash because he was running a fraudulent scheme in the first place.
The police were right to investigate such claims, but having now exonerated Mulchandani, what about the property speculators? These guys made fortunes by flipping properties. Suddenly, come the global financial crisis their cash ran out and they couldn’t meet their financial obligations on properties they had bought. So they cobbled up a story that lands an innocent man in jail.
Yes, there have been some dubious property schemes in the last few years, and yes there are many innocent buyers who have fallen victim. But there’s nothing easier than blaming developers. The fact is this: if you bought a property off plan, in the hope of getting very rich very quick, it’s your job to come up with the cash to pay for it in the first place. If you can’t, then every fault of the developer (of which there are many) is a secondary issue.
Speculating on property is not illegal. It is an art that feeds on the wheels of greed. But when the tyres go flat, as they did in 2008, it is time to get on your bike.
To be fair to Mulchandani, he isn’t now going after the speculators who so nearly brought him down, telling us, “I don’t need this bad energy in my life.”
The way he has started rebuilding his empire and reputation, with dignity and without a desire for vengeance, is a lesson to us all. Today he walks tall, his head held high. The same cannot be said of his accusers.
Anil Bhoyrul is the Editorial Director of Arabian Business.
Anil, a few things are still unclear - could you expand?
For one thing, the explanation given for the fraud case against Mr. Mulchandani is that it was brought by investors who couldn't pay for their properties. However, in an earlier article on this website, Mr. Mulchandani explained that the payments were not for actual properties, but for "services" which included advertising and preferential access to resold properties.
This in itself raises a couple of other questions - who in their right mind (even at the height of the Dubai property madness) pays AED 300,000 a month for just the possibility that they might be able to get their hands on some bargain-priced properties? And if the fees were for a monthly service, why not try to say you don't want the service any more, and ask for the post-dated cheques back? And why get into a situation anyway where you are obliged to offer your clients your properties at below market price? Why not just sell them to anybody at the market rate?
Please Mr. Anil Bhoyrul, do not say the UAE justice system works because it doesn't. I am one of the thousands of investors living IN THE UAE who has lost his savings to developers who tried to become rich over night. I have done all I can with the limited financial resources I had left. No result.
True this is an example of the righting of what would appear to be an original miscarriage of justice, and we are undoubtedly happy for a foreign defendant who has actually cleared his name. However, one positive ruling on behalf of a developer, does not completely exonerate the Dubai justice system from a property market perspective.
On the other side of the coin there are literally thousands of investors in the property market who have effectively been duped, they are unlikely to ever take delivery of a property and they cannot seem to get close to a refund via the legal system unless it resides under the jurisdiction of DIFC. A few rulings on behalf of the customer as opposed to the provider might address the imbalance and if there's no money in the Escrow account then that's a crime. That would go a lot further toward defining faith in the justice system for 85 per cent of the population.
Getting on to a car from a bike is easier than getting to a bike from a car - Good luck Kabir
Mr. Anil, you comments are one of the worst propaganda articles I ever read. I have many doubts of the things said. Maybe this case wants to send a reassuring signal out to all those developers who took monies and still today are keeping it. Where does the Dubai legal system work? Advance a 8% court fees for what? How many investors got their money back? How many developers have been condemned for fraud or breach of contract?
I gave 4 years of my life to serve the dubai workforce...! yet, as usual, I see no blame on the system that enabled such speculations; which at the end lead to its failure.
Maybe the legal system works in Dubai. But even if it does the perception is not that. You just need to check this same newspaper to see how any traffic related issue involving locals and foreigners are handled.
Again, I may be totally wrong, but it is this perception that shapes our decisions to invest here.
Oh, btw, if you have such low opinion of the posters here maybe you could do without this section. In any case you only publish the posts you approve.
Have you said anything to the bank that you are sending money to? I have a demand draft from the developer to the bank dated april 2008 to refund sales proceeds to me but I am still waiting, these banks are supposed to have international cooperation, you will never see a cent or a home from dubai. Get on dubai facebook, and email the united nations daily, and other international organisations. like fox , cnn, there is one out there that will listen, someday. Try firstname.lastname@example.org.
A system that has ended up promoting greed, with little control to protect the ordinary citizens, has caused the damage. Speculators and developers have to be blamed for thier part, but a vsion for sustainable development that will protect the interest of the people should have guided the regulators. Human development and prosperity of citizens should be the key drivers for a country; commercial success cannot be the goal of a country. Commercial success is meant for companies, and they are means to support the economic goals of a country.
Dubai's property circus has become completely unglued. My guess is that there is further correction to come and property values will end up where they ought to be. The misguided had faith in developers to deliver on their promises and the whole saga resembles a "Titanic style sea voyage". The lesson is this... The developers and speculators set a course. They had no reliable maps and the captain didn't know where he was going and the navigator, first mate and other hands were a bunch of misfits, meddlers and malcontents who gave no indication that they actually knew what they were doing. Did you ever really think that they would arrive at their destination? Not a chance! But I'm sure that all who participated and their money will end up where it ought to be.